Hindustan Copper gains on stake sale reports

MUMBAI: The stock of Hindustan Copper shot up as much as 16% in trade on the Bombay Stock Exchange Thursday a day after the government said it would sell 4% of its stake in the copper producer.

As part of its Rs 30,000 crore disinvestments plan, the government of India has earlier stated it would sell 9.5% of its stake in Hindustan Copper. But yesterday it revised this number down to 4%. After an initial negative reaction to the revised plan, the stock gained is currently trading 13% higher at Rs 270.7.

Post the divestment, which is expected to happen on Friday, November 23, 2012, the Government's holding would come down from 99.5% to 95.5%.

Unlike its private sector competitors Hindalco Industries and Sterlite Industries Hindustan Copper owns all the copper mining leases in the country thereby making it the only fully integrated copper producer.

During the September 2012 ended quarter, the company reported a 5% year-on-year increase in total income to Rs 283.29 crore. But net profit fell by 6% to Rs 43.70 crore on account of higher depreciation charges. At an operating profit level, however, there was an improvement. Its operating profit margin increased both sequentially as well as on a year-on-year basis to 32%. It has strong balance sheet with healthy cashflows and virtually no debt.

The stock has gained 28% in market value year to date when the Sensex gained 19%. It currently trades at a price to earnings (P/E) multiple of 71 times. Hindalco trades at 11 times P/E while Sterlite is available at 6.2 times P/E.